LOOKING AHEAD TO 2025
HOSPITALITY
2024 PREDICTION RECAP
MORE OF 2024 IN REVIEW
Court Strikes Down Onerous 80/20/30 Tip Credit Rule
Staffing Shortages Remain Critical Concern Hospitality employers have been facing major staffing shortages in recent years, straining operations and impacting customer service – as well as the bottom line. We expect employers to continue grappling with staffing issues in 2025. Additionally, President-elect Trump’s announcement that former ICE Acting Director Tom Homan would serve as the new “border czar” is yet another strong reminder that employers should anticipate a renewed focus on immigration enforcement come January. Deportations and voluntary departures will likely have a major effect on the hospitality industry – especially regarding the use of staffing agency employees. No Movement on “No Tax on Tips” Proposal President-elect Trump vowed to support legislation that ends federal income taxes on tips for hospitality workers – but this campaign promise is a long way from becoming law. Supporters say such a move would help employees take home more pay without forcing hospitality employers to increase base wages in the face of high inflation and low margins. Critics, however, say income-tax-free tips may drive base wages down, encourage customers to tip less, and cause a revenue shortfall for the federal government. We’ve seen some movement in Congress on this issue, but it is a controversial proposal that we expect to face significant opposition. More Big Changes Expected Post- Chevron SCOTUS rocked the legal world in 2024 when it overturned the famous Chevron doctrine, holding that that courts shouldn’t defer to an agency’s interpretation of an ambiguous federal statute. The Loper Bright ruling gives the courts – not administrative agencies – the power to say what the law actually is. Already, courts have cited to Loper Bright in decisions blocking the 80/20/30 tip credit rule and the federal overtime rule — which aimed to raise the salary threshold for the so-called “white-collar” exemptions to about $59k and caused significant compliance challenges for hospitality employers. We don’t expect those two rules to be resurrected, and we expect more federal agencies rules that impact the hospitality industry to be challenged and potentially dismantled in 2025. Click here to explore the various ways this blockbuster SCOTUS ruling could impact on your workplace in 2025 and beyond.
Hospitality Employers Embrace AI
A federal appeals court delivered good news when it blocked the DOL’s infamous 80/20/30 rule in August, providing immediate relief to hospitality employers around the country by vacating the regulations in question. The DOL’s rule — which created time- keeping and other compliance nightmares — applied to employers that take the tip credit toward their minimum wage obligation under federal wage and hour law. The 5th U.S. Circuit Court of Appeals said the DOL’s interpretation doesn’t align with the FLSA’s text or the intent of Congress. We expect cases making similar arguments and relying upon this decision to crop up in district courts around the country. Entire Industry Braces for NYC’s Safe Hotels Act New rules regulating hotels in NYC will take effect in 2025 under the Safe Hotels Act. NYC lawmakers are aiming to address safety concerns regarding human trafficking, crime, and cleanliness — but the act goes far beyond simply addressing these straightforward concerns. The law, passed in October, will place restrictions on how hotels operate as a whole and seemingly encourages unionization. Hospitality businesses nationwide will want to track this new law, as unions could push for similar rules in more cities. Restaurant Settles After Denying Cook’s No-Sundays Request A North Carolina restaurant franchisee agreed to pay $40,000 and take other corrective measures in August to settle a religious discrimination and retaliation lawsuit filed by the EEOC after being accused of denying a cook’s no-Sundays request. This settlement highlights the importance of taking steps to protect your restaurant and comply with federal and local anti-discrimination laws.
All industries have their early adopters, and hospitality is no exception. We correctly predicted that hotels, resorts, restaurants, cocktail bars, spas, cruise lines, and others in the industry would continue to leverage or experiment with artificial intelligence. Indeed, AI is being used to guide customer experiences, improve efficiency and profitability, and predict what guests are going to want next. Here’s our guide on leveraging AI while showing care for your guests.
HOW’D WE DO ON OUR PREDICTION? We got the prediction RIGHT
Alden J. Parker
Andria Lure Ryan
Sacramento/San Francisco Regional Managing Partner and Co-Chair, Hospitality Industry Group aparker@fisherphillips.com
Atlanta Partner and Co-Chair, Hospitality Industry Group alureryan@fisherphillips.com
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